Blockchain Security: Understanding the Flawed Pricing Calculation of Deflationary Tokens

04/28/2023 12:04 • AI Insights • 87 views

According to reports, security agency BlockSec tweeted that the fundamental reason for the hacker attack on the Polygon ecosystem project 0VIX Protocol is the flawed pricing calculation of deflationary tokens. Specifically, vGHST is the equity token of GHST, and the lending platform provides a market for vGHST (ovGHST). The ovGHST price oracle machine depends on the conversion rate from vGHST to GHST. The attacker first borrows a large amount of vGHST in contract 0x49c6 to increase the corresponding borrowing amount. Afterwards, he transferred a large amount of money to the vGHST contract. This will affect the conversion rate from vGHST to GHST. Therefore, the contract 0x49c6 becomes insolvency, and the attacker gains by clearing the contract.

Security Agency: The root cause of 0VIX being attacked is a flaw in the price calculation of deflationary tokens

Blockchain technology has been an emerging field that has revamped the way we think about security and transactions. However, with new technology comes new challenges. One of the most recent events that shook the blockchain community is the hacker attack on the Polygon ecosystem project 0VIX Protocol. According to security agency BlockSec, the fundamental reason for the attack is the flawed pricing calculation of deflationary tokens.

The Price of Deflationary Tokens

VGHST is an equity token of GHST, which is a lending platform providing a market for vGHST (ovGHST). The ovGHST price oracle machine depends on the conversion rate from vGHST to GHST. Deflationary tokens work by reducing the total token supply, which increases its value over time. In the case of vGHST, the value of the token would increase as its supply decreases, leading to a higher vGHST to GHST conversion rate. However, this mechanism can also be exploited by attackers.

How the Attack Occurred

The attacker first borrowed a large amount of vGHST in contract 0x49c6. This was done to increase the corresponding borrowing amount. Afterward, the attacker transferred a large amount of money to the vGHST contract, which affected the conversion rate from vGHST to GHST. As a result, contract 0x49c6 became insolvent and the attacker successfully cleared the contract, gaining from the process.

Implications of the Attack

The attack on 0VIX protocol highlights the importance of secure pricing calculations in the blockchain ecosystem. It’s crucial to ensure that the conversion rate of deflationary tokens is accurately calculated to prevent similar attacks.

Preventing Similar Incidents

There are several ways to prevent similar incidents from happening. One of them is to perform a thorough testing process before implementing smart contracts. It’s also vital to incorporate failsafe mechanisms that would trigger a halt in case of an attack. Finally, blockchain developers need to be more cautious and attentive to potential security threats.

Conclusion

The blockchain ecosystem is still evolving, and it’s critical to maintain secure and transparent transactions to promote trust and reliability among users. The 0VIX protocol attack serves as a reminder of the importance of secure pricing calculations and the need for blockchain developers to be vigilant in ensuring the platform’s security.

FAQs

Q1. What is the significance of deflationary tokens in blockchain?
A1. Deflationary tokens reduce the total token supply, which increases its value over time. This mechanism can also be exploited by attackers who want to manipulate the token’s value.
Q2. What are some ways to prevent similar attacks on blockchain platforms?
A2. Preventive measures include thorough testing processes, failsafe mechanisms, and cautiousness among blockchain developers.
Q3. Why is security crucial in the blockchain ecosystem?
A3. Security is essential in the blockchain ecosystem to maintain trust and reliability among users and promote secure transaction processes.

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